Which of the following statements is CORRECT? As a firm increases the operating leverage used to produce a given quantity of output, this will
A)normally lead to an increase in its fixed assets turnover ratio.
B)normally lead to a decrease in its business risk.
C)normally lead to a decrease in the standard deviation of its expected EBIT.
D)normally lead to a decrease in the variability of its expected EPS.
E)normally lead to a reduction in its fixed assets turnover ratio.

Question

Quizplus · Accepted Answer

Increasing operating leverage typically involves increasing fixed costs relative to variable costs, which can lead to a reduction in the fixed assets turnover ratio as fixed assets are used more intensively.

Which of the Following Statements Is CORRECT? as a Firm